Foreign investors buy UK government debt at record rate

Foreign investors buy UK government debt at record rate

Foreign investors bought a record-breaking volume of UK government debt over the past year, helping to fund the unprecedented levels of borrowing during the Covid-19 pandemic.

Figures from the Bank of England this week showed that overseas buyers snapped up £11.3bn in gilts in April, taking the total for the rolling 12-month period to £89.8bn, the highest ever.

Analysts said the last-minute UK-EU trade deal struck in December had assuaged fears of a fresh tumble in the value of the pound when the UK left the block at the end of January, releasing pent-up demand for UK assets. Meanwhile, some buyers in economies such as the eurozone and Japan, where the safest government debt trades at sub-zero yields, have also been drawn to the relatively high-yielding gilt market.

"The return of investment inflows back into the UK following the Brexit deal release valve has been a key driver,“ said Agne Stengeryte, a rates strategist at Bank of America. Foreign buying of gilts could provide a further boost to the pound, which has gained almost 4 per cent against the dollar this year, she added.

Despite the record inflows to the gilt market, the proportion of UK government debt owned by foreign investors has actually